President Susilo Bambang Yudhoyono has made revitalizing Indonesia's strategic industries as priority in the first 100-days of his second administration, in an effort to achieve a level of independence in acquiring a weapons system for the Indonesian Military (TNI), as well as other legal enforcer agencies. Defense Ministry Purnomo Yusgiantoro acted quickly by organizing a series of workshops on the program from late November until early December discussing various issues from financing to quality.
The Jakarta Post's Novan Iman Santosa looks into the issues.
The end of 2009 might be a significant time for Indonesian strategic industries, which have been left in derelict condition following the 1997-1998 financial crisis.
First, it was President Susilo Bambang Yudhoyono's commitment to revitalize the strategic industries, all state-owned, as a part of the priority programs set for his second presidency.
Second, December 2009 was the 20th anniversary of the arrival of the American-made F-16 Fighting Falcon fighters for the Indonesian Air Force.
Three F-16s arrived at Iswahjudi Air Force Base in Madiun, East Java, on Dec. 12, 2009.
Indonesia bought 12 F-16s, eight single-seater F-16As and four dual-seater F-16Bs.
The deal to buy the F-16, which defeated its rival French-made Mirage 2000 after tight competition, was struck in 1986 with a total value of US$337 million.
As part of the deal, maker General Dynamics agreed to a 35-percent offset deal of the flyaway price with state aircraft maker PT Industri Pesawat Terbang Nusantara (PT IPTN), the old name of PT Dirgantara Indonesia (PT DI), located in Bandung, West Java.
The offset deal saw PT IPTN make a number of F-16 spare parts: vertical fin skins, left and right engine access doors, wing flaperon, fuel pylon, weapon pylon and nose wheel doors, totalling 3,476 pieces.
It is safe to say that the offset deal had significantly increased PT IPTN's expertise in the industry following its earlier ventures, especially with Spanish CASA, now CASA EADS.
The Indo-Spanish venture first worked on the license production of the NC-212 Aviocar light transport aircraft and then co-designed and co-produced the CN-235 medium transport aircraft.
These ventures were part of PT IPTN's four-steps toward developing the indigenous aerospace industry starting from license production, co-production, self-production and research into basic sciences.
Simply speaking, import substitution and replacement.
These steps were lined out by the now-defunct Strategic Industries Management Board (BPIS) for its 10 strategic industries, which also include shipyard PT PAL Indo-nesia, weapons maker PT Pindad, explosives maker PT Dahana, train maker PT INKA, electronics and communication company PT INTI and PT LEN, steel maker PT Krakatau Steel, and EPC firms PT Bisma Boma Indra and PT Barata Indonesia.
The plan to have a solid, integrated strategic industry crashed following the 1997-1998 financial crisis in Asia when the IMF demanded the government no longer support PT IPTN, considered as the pinnacle of other strategic industries, for its financial aid program.
"We were stabbed," former president B.J. Habibie told the workshop participants on IMF's order to abandon PT IPTN.
"But now countries around the world provide bailouts for their private companies when the prospect of a financial crisis looms."
Habibie said he could not understand why the government was prevented from financing its own firm.
But now, almost one decade later, PT DI is set to soar again.
Even without government intervention, PT DI is now working on four units of CN-235 Maritime Patrol Aircraft (MPA) for the South Korean Coast Guard at about US$94.5 million.
PT DI defeated CASA EADS, as well as American and Israeli firms, to win the contract competitively.
The Bandung-based company has also signed a contract with the Indonesian Navy to produce 3 units of CN-235 MPAs, with a total contract of about $80 million. There are also a number of commercial civil contracts that PT DI won.
PT DI has proven that with minimal help from the government, it could achieve something fruitful.
Taking lessons from PT DI as an example, one can only imagine what it would be like if the government wholeheartedly supported and turned the strategic industry from companies that lose profit to world-class companies.
